There are said to be at least 105 million and maybe as many as 2 billion parking spaces in the United States. A third of them are in parking lots, those asphalt deserts that we claim to hate but that proliferate for our convenience. One study says we’ve built eight parking spots for every car in the country.

I saw the documentary: ZIPPER: CONEY ISLAND’S LAST WILD RIDE (here’s the trailer) over the weekend on the land use battle in Coney Island. I like the filmmakers’ focus on the guys that ran the “Zipper” (the ride is guaranteed to make me throw up) to humanize the development battle between NYC, Coney Island residents and the developer. Plus you can’t go wrong with a good Blue Oyster Cult song in the opening.

After watching the documentary (you can purchase or rent it here), you can’t help but see how difficult it is to develop property in NYC striking a balance between community needs with economic feasibility as well as navigate political power and government.

Paul Goldberger, the Pulitzer Prize-winning architectural critic at the New Yorker and voice of design reason, penned a comprehensive overview of the “tall towers” building phenomenon in the latest issue of Vanity Fair. It’s an engrossing piece with stunning visuals as it correctly describes the global trend that is creating it.

I believe Michael Gross, the author of the new book on 15 Central Park West, Manhattan’s truly first super luxury condominium that was wildly successful and oblivious to the global economic crisis, coined the phrase “Billionaire’s Belt” which best describes this new Manhattan submarket and new housing classification. I was pushing “57th Street Corridor” as a label but there were no takers so I’ve modified Michael’s phrase to “Billionaires’ Row” as if all these buildings are fighting to be the best.

I like Goldberger’s description of the new design trend:

…the latest way of housing the rich, is an entirely new kind of tower, pencil-thin and super-tall—so tall, in fact, that one of the new buildings now rising in Manhattan, the 96-story concrete tower at the corner of 56th Street and Park Avenue, 432 Park Avenue, will be 150 feet higher than the Empire State Building when it is finished…

And that these residences provide…

a place not for its full-time residents but for the top 1 percent of the 1 percent to touch down in when the mood strikes.

One thing missing from this piece, and perhaps rightfully so is the discussion of why these projects are being built beyond the notion that the global wealthy are demanding them. In Manhattan, new construction developers have to target the super luxury market because land prices are at record highs – we just came out of a record setting building boom last decade – and few prime sites are available. With a high cost of land, inflated labor and materials costs, the math does’t work otherwise for more mainstream projects.

Our city’s obsession with chronicling lifestyles of the Wall Street rich and dysfunctional in the previous boom with prices of $3,500 to $4,000 per square foot seem downright quaint now. Now upwards of $10,000 per square foot has emerged as the price point for all participants in this market niche to aspire to.

New York City residents don’t seem quite sure what to think about these projects and their likely full time emptiness. One thing is for sure, the world’s elite are now a lot more visible and it’s a lot easier to point fingers…doesn’t One57 kind of look like it’s flipping the city off while it looks at the park?

Source: New York Observer.

But this global pattern of the wealthy searching for hard assets to invest in doesn’t appear to be ending anytime soon.

Here is an interview I recently did for Bloomberg Television’s In The Loop on the first phase of the long awaited and sorely needed Second Avenue subway line. I had also looked at this data about two years ago.

For the show I crunched closed sales data for the 4th Quarter of 2013 versus the same period in 2009 and provided a similar time frame for the rental market. I defined the impacted subway zone as the Upper East Side neighborhood between Third Avenue and First Avenue extending from 96th Street to 59th Street. Areas out side the zone were simply those to the east and west of it but within the neighborhood. I realize that simply taking the average price of all transactions in each of the zones are subject to skew. However given the large size of the zones, I think it is a reasonable way to extract some sort of impact.

Based on the results, the subway zone fell behind the areas outside the zone during the 4 year time span.

The first is yesterday’s Cities Do It Better article in the NYT Economix section where he asks the question:

What makes dense megacities like New York so successful?

Economic geography was one of my favorite courses in college because it was so applicable to understanding the logic of how a city evolved and operated. Access to natural resources, transportion, labor, etc. He references Jed Kolko’s essay in “Agglomeration Economics” that he edited.

A key point as far as I’m concerned:

In a multi-industry city, like New York, workers could readily find some other employer. The young Chester Carlson was laid off from Bell Labs during the Great Depression, then moved to a law office as a patent clerk and then joined the electronics company that would make Duracell batteries and then invented the Xerox copier.

It’s sort of like my assumption that it is much more likely you will run into someone you know from another state or went to high school with in Manhattan than you would if you lived a mid-sized city. High density brings opportunity.

But there is more risk in cities like Detroit whose economy has always been one-dimensional. Pittsburgh and Houston are examples of smaller cities that learned to diversify after hovering near insolvency in prior decades.

[click image to open article]

His second article was released in City Journal called Preservation Follies which warns against excessive landmarking which serves to make Manhattan less affordable. He’s not anti-preservation, but he makes a case for excessive landmarking which has including buildings that don’t deserve it. His approach was novel to me, in the way that he tracks acres as the metric of landmarking:

He also looks at the addition of housing units within landmark districts:

During the 1980s, the mostly historic tracts added an average of 48 housing units apiece—noticeably fewer than the 280 units added in the partly historic tracts and the 258 units added in the nonhistoric tracts. In the 1990s, the mostly historic tracts lost an average of 94 housing units (thanks to unit consolidation or conversion to other uses), while the partly historic tracts lost an average of 46 units and the nonhistoric tracts added an average of 89 units.

…and its impact on housing prices…

From 1980 through 1991, the average price of a midsize condominium (between 800 and 1,200 square feet) sold in a historic district was $494,043 in today’s dollars. From 1991 through 2002, that price was $582,671—an 18 percent increase. The average price of a midsize condo outside a historic district, meanwhile, barely rose in real dollars, from $581,865 in the first decade to just $583,352 in the second.

Westwood Capital, LLC, an investment bank, led by founder and managing partner Dan Alpert, projected that housing prices would decline by 28.2% from peak based on the Case-Shiller Index as a benchmark. Arguably pessimistic at the time, the 43% decline that actually occurred was a lot more bleak.

To firmly return to the upper limits of historically justifiable levels of stabile prices relative to rents in
particular, we believe the Case-Shiller 20 markets must decline, on average (with considerable
differences among markets), by an additional +/-16.9% from May 2009 levels.

In the final years of the housing mania of the 2000s, home buyers not only assumed the price they paid
would rise to the moon; they paid more than 50% of their homes’ purchase price toward what was effectively
a wildly overpriced option on that presumed growth, relative to the portion that could be reasonably
attributed to the cost of shelter. They not only massively overpaid that option; they were also leveraging
themselves to the teeth to do so. For the entire period from 1997 through the bubble’s peak in 2006, housing
prices in the Case-Shiller 20 metropolitan statistical areas rose by a total of 163.8% before inflation, and
107.6% after inflation is taken into consideration!

In other words, in addition to the cost of shelter, the housing bubble was caused by an irrational jump in the cost of anoption to purchase a property’s future price appreciation. The report concludes that that the future appreciation portion of the value equation was over valued by at least 50%.

Another point that was brought up related to the fact that the value of land is attributable to what it can be used for. When housing markets rise, it is really the value of the land that rises rather than the value of the improvements.

I also like the discussion on rent v. sales price disconnect that began in 1997.

A big concern going forward is rent deflation, which is already occuring as many “For Sale” properties are becoming rentals due to the lack of demand.

Here’s a pre-election tally and its substantial. California did not vote for the proposition because the law was too broad and pressure from conservation groups concerned that it would weaken government authority too much.

Teardowns.com seems to be yet another niche service created by the housing boom that might now be torn down.

Mr. Hickey provides support for his argument that there is long-term demand for his services:

The teardown phenomenon is not new. Houses have been demolished and replaced for as long as they have been built – just take a look at historic pictures of your community, chances are you will see the current “teardown” is a replacement for something even older.

We agree that new business models pop up to take advantage of current trends, but we will argue that offering a service to help facilitate the rebuilding of outdated and in some cases obsolete housing stock within established communities is shallow or temporary.

The paper makes some great points and I am not anti-teardown in most cases (except historic properties). I appreciate Mr. Hickey’s feedback and respect his eagerness to defend his business.

However, the point of my post was simply that there have been a seemingly endless array of niche brokerage services that arrived on the scene during the housing boom. With the market softened by rising inventory, it seems unlikely that teardowns will continue at the torrid pace of the past few years leaving even less room for a specialty business. Yet I do wish Teardowns.com success.

Its been a year since the eminent domain ruling and the City of New London, Connecticut has negotiated with the two remaining homeowners to vacate their private homes in order to make way for private development.

The ruling touched a nerve for the simple reason that its one of the basic principles of US citizenship.

Government ability to seize private property for public good has been relegated to things like roads, schools and government buildings. Economic reasons have now reached the forefront of the concept. This is not a new concept.

For them to come in and tell me how much my property’s worth and for me to get out because they’re bringing in somebody else when I own the land is unfounded to me.

The federal government has now taken action to prevent its own agencies from seizing private property [WSJ] except for public projects reflecting conservatives concerns over the erosion of the Constitution’s Fifth Amendment. They have argued such takings are an unjustified governmental abuse of individual rights. Liberals see the new power as a powerful tool in urban renewal to revitalize cities. The executive order is an attempt to offset some of the momentum of the Supreme Court ruling.

In 1998, pharmaceutical giant Pfizer built a plant next to Fort Trumbull and the City determined that someone else could make better use of the land than the Fort Trumbull residents. The City handed over its power of eminent domain—the ability to take private property for public use—to the New London Development Corporation (NLDC), a private body, to take the entire neighborhood for private development. As the Fort Trumbull neighbors found out, when private entities wield government’s awesome power of eminent domain and can justify taking property with the nebulous claim of “economic development,” all homeowners are in trouble.

I am all for urban revitalization, new urbanism, etc., but this ruling goes beyond where I am comfortable. Everyone can call it as they see it from a distance, thats easy. Imagine living in your home for 40 years in an area where there is no urban blight, where houses are kept up, and the community is cohesive? What is the just compensation in this case? That is exactly what happened in New London, CT.

I suspect that the issue of just compensation, is probably more than market value can support.

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Since we are in the zenith of American flag season between Memorial Day and 4th of July and there have been so many new homeowners of late (Fannie Mae says that 69% of all Americans own their home) that I was intrgued by the fact that there are many of us who are unable to fly the flag.

In Jay Romano’s article Why Some Americans Can’t Fly the Flag [NYT], most rental tenants, co-op and condo owners are restricted. This also applies to many planned urban developments, and properties located in private associations.

the federal Constitution does not prevent a co-op or condominium from enforcing rules pertaining to the appearance of the building. Just as a board can stop you from painting your window frames purple, it can stop you from hanging a flag from them.”

However, state laws are inconsistent. In the article, he cites Connecticut and New York as not having laws pertaining to flag displays while New Jersey does.

Tenants need to refer to their leases and co-op and condo owners need to refer to their homeowner association rules for guidance. Where there are such restrictions for external display, many are able to display them inside their windows.

There are organizations that actively seek to overturn the any such restrictions. In many cases, these rules have been in existence prior to when the unit was purchased so it should come as no surprise. If not, then the unit owner should have the option of going through the political process within the organization to try to get the rule overturned or modified.

I am all for patriotism but I can only imagine the public safety nightmare if residential occupants of highrise buildings were allowed to attach flagpoles outside of their units. Then again, imagine the safety issues of all those window air conditioning units that are hanging outside all those windows high above the pedestrians below.

I lived on a classic cul-de-sac when I was a kid in the 1960’s when they were all the rage in new suburban tract housing. Our neighborhood was full of them. All the houses faced the street and there were no windows on the side of the house (that I remember), providing a sense of privacy (or isolation, depending on your perspective). Of course I remember losing control of my bike on the downhill leading into the cul-de-sac and splitting the bottom of a split rail fence (as well as my knee).

The term cul-de-sac is French for bottom of the bag. Their objective was to limit traffic through residential neighborhoods thereby promoting quiet and enhancing safety for children. Today developers charge a premium for properties located on them for this reason and they remain popular. Their existence in a subdivision allows more houses to be squeezed into the land parcel.

But the New Urbanism movement says they promote driving by separating streets, making it impractical to walk, isolating neighbors from each other and encouraging crime because of limited pass-through visibility.

“The actual research about injuries and deaths to small children under five is that the main cause of death is being backed over, not being driven over forward,” he says. “And it would be expected that the main people doing the backing over would in fact be family members, usually the parents.”

Armed with such arguments, critics of the cul-de-sac have won some victories in recent years. In cities such as Charlotte, N.C., Portland, Ore., and Austin, Texas, construction of cul-de-sac-based suburbs has basically been banned. In other places, cul-de-sac communities have been retrofitted with cross streets.

They still remain popular with homebuyers and I suspect they are so engrained into our suburban culture that they will remain a staple of design for generations to come.

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About Jonathan Miller

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts. He holds the Counselors of Real Estate (CRE) and Certified Relocation Professional (CRP) designations. He is an Appraiser “A” Member of the Real Estate Board of New York and a member of Relocation Appraisers and Consultants, Inc.Learn More...

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